NEW YORK (HedgeWorld.com)–Hedge fund managers are still procrastinating when it comes to registering with the Securities and Exchange Commission, but the SEC also may be lagging in its preparedness, according to one consulting firm.
After a brief analysis of completed registration statistics through Sept. 5, Carbon360 predicts that the SEC will be caught off guard in the coming months, as the number of registration applications swells to unprecedented levels with hedge funds rushing to beat the Feb. 2006 deadline to register as investment advisers.
Only a portion of the hedge fund universe has registered with the U.S. regulator–213 managers to be exact, which would be a far cry from the 50% of the hedge fund industry that SEC officials claim to have already processed.
The SEC’s New York and Boston offices, which oversee New Jersey and Connecticut respectively in addition to those cities’ states, will likely be the hardest hit; Carbon360 estimates that another 1,900 managers will begin the registration process shortly.
“It doesn’t take much to look at the tea leaves,” said Brian Shapiro, president of Carbon360, a research and advisory firm that works with hedge fund managers.
So far many of the industry’s recognizable names have yet to hit the Investment Advisory Registration Depositary, which is the electronic filing system used by managers to register with the SEC.
Still, there may some variables at play. Many larger firms are thought to have increased their lock-up periods to two years in order to avoid registration. Mr. Shapiro believes that for the most part those hedge fund managers are not as concerned with the rigors of registration as they are with liquidity issues, and they are more interested in keeping the majority of assets invested rather than in cash reserves held in case of large investor redemptions.
Taking into account the number of single managers that may offer single funds or funds of hedge funds with lock-ups of two years or more, Carbon360 is standing by its initial estimate of 1,900 hedge fund managers registering with the SEC for the first time.